T-Mobile's new subsidy-free pricing plans

T-Mobile has given its wireless plans a major overhaul, betting that lower service prices, the elimination of two-year contracts, and “down payments” on smartphones will trump the traditional subsidy model of other carriers.

Because the pricing model for the new Simple Choice (a.k.a. "UnCarrier") is so different, comparing T-Mobile’s new plans with the other major carriers is a little tricky. So let’s walk through the plans and how they’re different from Verizon, AT&T, and Sprint.

T-Mobile plan basics

With T-Mobile’s new Simple Choice plans, the cost of service is always cheaper than the other major carriers, but the cost of hardware is more expensive. Still, when you do the math, T-Mobile remains cheaper in the long run as long as you’re comparing the same type of wireless service.

Consider, for instance, Samsung’s Galaxy S III on a two-year plan with 2GB of data on the UnCarrier plan. The base service costs $60 per month. The phone itself costs $110 up front, plus $20 per month for two years, for an overall cost of $590. In total, the two-year cost of owning a Galaxy S III on T-Mobile is $2030.

T-Mobile

T-Mobile’s plans include unlimited talk and text, and the ability to use your phone as a wireless hotspot at no extra charge. The same is true for AT&T’s Mobile Share plans and Verizon’s Share Everything plans. So let’s compare: On AT&T, you’d pay $2240 over two years (and that’s with just 1GB of data), for a subsidized Galaxy S III. On Verizon, you’d pay $2600 over two years.

AT&T does come out cheaper over two years if you get a bare-minimum individual plan at $70 per month, but that only includes 450 voice minutes and pay-per-text message. For unlimited talk and text, T-Mobile’s plans are cheaper both up-front and over time. And unlike AT&T and Verizon, you save even more money after two years, when you’re no longer paying off the full price of the phone.

The savings are even bigger for T-Mobile’s Family Plans, which cost $100 per month for two lines with 2GB of data and unlimited talk and text. Each additional line costs $20.

T-Mobile

Let’s do the math for three lines, each with a Galaxy S III: On T-Mobile, the two-year price is $4650. On AT&T, the same service (with 6GB of data) costs $5280, and on Verizon, it costs $5400. Even if you got the bare minimum amount of data on AT&T’s and Verizon’s shared data plans, you’d still end up paying more during two years than you would on T-Mobile.

For the data hogs

For the Galaxy S III, the total, two-year cost is $2270 on T-Mobile. By comparison, Sprint’s two-year cost is $2840. That’s $110 per month for an unlimited talk, text and data plan, plus $200 for the phone. Once again, T-Mobile wins. The only way Sprint comes out ahead is if you get a plan with just 450 voice minutes for $80 per month, which brings the two-year cost down to $2120.

It’s also worth noting that T-Mobile’s hotspot options are more favorable for unlimited plans. On T-Mobile, you get 500MB of mobile hotspot usage with an unlimited data plan, compared to nothing on Sprint. A 2GB hotspot plan from T-Mobile costs $10 per month, compared to $20 per month on Sprint.

The bottom line

Pricing aside, T-Mobile has some drawbacks. Currently, you can’t get an iPhone through T-Mobile, although this will change. T-Mobile’s nationwide coverage generally isn’t as strong as AT&T and Verizon, and T-Mobile is behind in rolling out its 4G LTE network. While T-Mobile is expected to turn on its LTE network this week, it’ll be some time before the carrier is fully stocked with 4G LTE phones. Many metropolitan areas are covered by T-Mobile's speedy HSPA+ cellular network however, which is promoted as 4G but might be more accurately called 3.5G.

Strictly in terms of cost, your dollar will go further with T-Mobile, but the biggest benefits are for families, for customers who need unlimited talk and text, and for users who plan to keep their phones for a lot longer than two years. If you’re okay with fewer minutes, less data or no included text messages, you may still save money in the long run by going with another major carrier instead. Do your homework!

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T-Mobile’s approach to selling the phone is a bit different, thanks to its recent plan to drop subsidies. Instead of a two-year contract with a subsidized price, qualified T-Mobile customers can get the 16GB iPhone 5 for $100 upfront, plus monthly payments of $20 for 24 months. The 32GB and 64GB iPhone 5 models, which will only be available online, will sport down payments of $200 and $300, respectively.

In addition, T-Mobile is also offering similar arrangements for the iPhone 4S and iPhone 4 “in select markets.” The older iPhones will be available for $70 and $15 down payments, respectively; while the 4S will also require $20 monthly payments over two years, the iPhone 4 only runs $15 per month.

With those monthly payments, the prices of the handsets work out to $580 for the iPhone 5, $550 for the iPhone 4S, and $315 for the iPhone 4. By comparison, an unlocked 16GB iPhone 5 will cost you $649 from Apple, an unlocked 16GB iPhone 4S will cost you $549, and an unlocked 16GB iPhone 4 will cost $450. Note, however, that unlike Apple’s unlocked offerings, T-Mobile’s phones are only unlocked once customers have paid off the balance they owe T-Mobile. Engadget has reported that the T-Mobile iPhone will be a slightly different version of the model currently sold for use on AT&T in the U.S., and that existing versions of that model (number A1428) will not be compatible with use on T-Mobile. Apple had not responded to a request for comment on that matter at the time of this writing.

A T-Mobile spokesperson confirmed to Macworld that customers who cancel their service before those 24 months are up must pay off the balance by the end of 24-month period.

As expected, T-Mobile used today's Uncarrier event in NYC to announce a new mobile plan consisting of unsubsidized phones (read: much more expensive) with cheaper monthly unlimited talk, text, data, and even tethering plans. The new plans might give the service a leg-up against other major carriers. Now we are learning a few more details.

The service will finally offer the iPhone 5 for $99, making it available on April 12th. In addtion to the monthly T-mobile fee, the iPhone will carry an additional $20/month fee. As an added goodie, the T-Mobile iPhone 5 will be the first to offer nationwide HD Voice.

The Blackberry Z10 will be T-Mobile's first 4G LTE smartphone, available for $99. And the Samsung Galaxy S4 will be available in May.

The company aims to reach 200 million people by the end of 2013.

The company announced that they will be rolling out a new 4G LTE network to cover all those new "unlimited" deals in seven select markets to start: Baltimore, MD; Kansas City, KS; Houston, TX; Las Vegas, NV; Phoenix, AZ; San Jose, CA and Washington D.C. New York City will be live by the end of the summer.

In a bid to escape from its basement slot among nationwide cellular carriers, T-Mobile has unveiled a radical new pricing system that departs from the contract plans mobile users have grown used to hating.

To be sure, the new plans are a welcome injection of out-of-the-boxitude that can only benefit consumers. Still, “different” doesn’t always translate to “better.” T-Mobile may have branded its new payment plan as the “Simple Choice,” but users may be forced to take out a calculator and crunch some numbers to figure out if it’s truly the right choice for them.

Digging into the details

Mobile consumers have shown a willingness to spend up to $200 as a subsidized rate to get the hottest, newest, shiniest toy in their pocket on top of $100 per month in monthly coverage charges. Aside from tech journalists, though, most users probably don’t spend too much time ruminating on how the major carriers subsidize the cost of these bleeding-edge gadgets so as make their money back over the life of the two-year, locked-in contract. That’s just the way it was when dealing with the major carriers in the smartphone era. Until now.

On Tuesday, T-Mobile announced its plan to offer phones without subsidies attached to no-commitment contracts that begin at only $50/month for one phone. Sounds reasonable so far. We all hate tying ourselves to one provider for the next two years, right?

The Galaxy S III does not have a compatible LTE radio, said Randy Meyerson, senior director of product marketing at T-Mobile, during an event in New York City, where the company announced the official rollout of its LTE network and new mobile plans.

At the event, T-Mobile announced an iPhone 5 from Apple that will work on its LTE network. Other phones that will work on its LTE network include BlackBerry Z10, HTC One, and S3’s successor, Samsung Galaxy S4, which will go on sale starting on May 1. Samsung’s Galaxy Note II, which started shipping in September last year, will also work on T-Mobile’s LTE network, said a representative for the wireless carrier at the event.

T-Mobile officials declined to comment on whether an LTE version of the Galaxy S III would become available.

The S III was announced last year and started shipping in the U.S. for all major networks starting in June. When announced, the smartphone worked on LTE networks from AT&T and Verizon, but T-Mobile at the time did not offer LTE and was working on deploying the network. The S III smartphone shipped with Qualcomm’s Snapdragon MSM8960 chipset, which includes an integrated LTE radio.

T-Mobile USA's "radical" service plans promising no annual contracts aren't quite as radical as consumers might think, and the mobile operator will change its advertising and offer refunds in a settlement with the state of Washington.

On March 26, the fourth-largest U.S. carrier introduced a series of new service offerings, including no-contract monthly plans and a program that let customers pay for a new phone over the course of 24 months. In unveiling the plans, T-Mobile thumbed its nose at rival mobile operators, calling the new offerings "uncarrier" plans that would free the company and its customers from the constraints of conventional service agreements.

"This kind of simple, straightforward approach is core to the new company we are building." —T-Mobile

Now the company has agreed to clarify a few things in that pitch after an investigation by the Washington Attorney General's Office. Specifically, T-Mobile didn't adequately tell potential customers who bought phones on time that they would have to keep T-Mobile service for 24 months or pay off the rest of the phone's full price when they canceled the service, said Paula Sellis, an attorney who handled the case in the Attorney General's Office. The fine-print disclosures that T-Mobile did offer were hard to understand, she said.

"You had to dig very deeply to understand what the terms of the program were, and you had to put two and two together," Sellis said on a conference call on Thursday.